Is Your Intern an Employee Who Must be Paid (and afforded mandatory benefits)?

Fair Labor Standards Act [“FLSA”] is the federal law that applies to employers with gross annual revenues of $500K. The New York Labor Law [“NYLL”] applies to all employers.

These laws require that employees be paid not less than the current minimum wage for all hours worked. Currently, the minimum hourly wage in NY is $10.40. Effective December 31, 2018, the minimum hourly wage is $11.10.

Non-exempt employees who work more than forty (40) hours in a given week must be paid overtime, i.e., one and one-half times their regular rate of pay for all hours worked above forty (40).

Some employees are exempt from the right to receive overtime pay. To be exempt, the following three must be true:

EMPLOYEE MUST BE PAID A WEEKLY SALARY OF A SPECIFIED AMOUNT. IF PAID LESS, THEY ARE NON-EXEMPT (AND ENTITLED TO OVERTIME PAY) AS A MATTER OF LAW. Currently, the minimum weekly salary for an exempt employee in NY is $780.00 ($40,560/year). Effective December 31, 2018, the minimum weekly salary is $832.00.

THERE MUST BE NO UNLAWFUL DEDUCTIONS FROM THE SALARY PAID. In simple terms, absent five recognized circumstances, you cannot make any deductions from the salary paid. The five circumstances are: (1) absenteeism; (2) certain sick leave/Family & Medical Leave Act protected leave; (3) penalties imposed in good faith for infractions of safety rules; (4) unpaid disciplinary suspensions; and (5) certain mistaken overpayments.

FINALLY, THE DUTIES PERFORMED BY THE EMPLOYEE MUST MEET ONE OF SEVERALTESTS IN THE FLSA. The most common “white collar” exemptions are: (i) Administrative, (ii) Executive and (iii) Professional.

On January 5, 2018, the United States Department of Labor [“USDOL”]—the agency that enforces the FLSA—announced it would no longer apply the six-factor test in USDOL Fact Sheet #71 (https://www.dol.gov/whd/regs/compliance/whdfs71.pdf) to determine whether an intern was an employee for purposes of wage and hour laws. Instead, it will apply the “primary beneficiary” test used by several federal circuit courts (including the Second Circuit in Glatt v. Fox Searchlight Pictures, 791 F.3d 376 [2015]).

The primary beneficiary test considers the extent to which:

Both parties understand that the intern is not entitled to compensation.

The internship provides training that would be given in an educational environment.

The intern’s completion of the program entitles him or her to academic credit.

The internship corresponds with the academic calendar.

The internship’s duration is limited to the period when the internship educates the intern

The intern’s work complements rather than displaces the work of paid employees while providing significant educational benefits.

The intern and the employer understand that the internship is conducted without entitlement to a paid job at the internship’s end.

None of these seven factors are addressed with a simple yes or no answer. Rather, they are addressed by the extent to which each factor is met.

The factors are used to determine which party—the intern or the lawyer/other entity—is the primary beneficiary of the relationship. If at least 51 percent of the benefits go to the intern, the intern arguably is the main beneficiary and does not have to be paid.

Will New York Apply the Primary Beneficiary Test?: Historically, the NYS Department of Labor [“NYSDOL”]– the agency that enforces the NYLL—has required consideration of 11 factors, the six factors in USDOL Fact Sheet #71PLUS five more of its own.

Any clinical training is performed under the supervision and direction of people who are knowledgeable and experienced.

The trainees or students do not receive employee benefits.

The training is general and qualifies trainees or students to work in any similar business. It is not designed specifically for a job with the employer that offers the program.

The screening process for the internship program is not the same as for employment. The screening only uses criteria relevant for admission to an independent educational program.

Advertisements, postings, or solicitations for the program clearly discuss education or training, rather than employment, although employers may indicate that qualified graduates may be considered for employment.

Practical Advice: What can you do to limit your liability if you engage an intern and do not want the legal obligation to pay them?

Have a written policy and address as many of the factors above in writing with the intern BEFORE he or she begins the experience. Have the intern sign a document indicating that he or she understands and accepts your policy and description of the factors.

Train those who will interact with the interns to be sure that they respect each of the factors above and acts consistently with your direction.

Keep accurate records of the work done by interns.

Schedule internships to accommodate interns’ academic schedules, preferably permitting them to work after class hours, on weekends, or during vacations.

Limit the duration of internships to the time needed to impart specifically identifiable educational or training benefits to interns.

Liaise formally or informally with interns’ schools or instructors and document how the internship complements the interns’ academic program, preferably resulting in the intern receiving academic credit for the internship.

Assign individual mentors/supervisors to each intern to ensure that the intern receives some structured instruction and is not relegated only to performing menial tasks.

Regardless of Any Obligation to Pay, You may NOT Unlawfully Discriminate

Since 2014, interns in NY have been protected from unlawful discrimination like most employees. For example, an intern may not be subjected to harassment or other adverse action on account of their membership in a protected class (see Section 296-c of the NY Executive Law and https://dhr.ny.gov/sites/default/files/pdf/intern-rights.pdf).

Interns who complain in good faith of unlawful discrimination are protected from retaliation.

Interns who believe that their rights have been violated may file a charge of discrimination with the New York State Division of Human Rights [“DHR”], the agency that enforces Section 296-c. The deadline to file such a charge is 365 days from the date of the action they wish to challenge. Interns do NOT have to hire a lawyer to prosecute a charge of discrimination with the DHR.

Alternatively, an intern may file a lawsuit in New York State Supreme Court within three years from the date of the action they wish to challenge.

Earlier this year, we notified you about changes made to New York laws that prohibit sexual harassment in the workplace. The most significant changes were that ALL employers must (1) adopt and distribute to employees a sexual harassment prevention policy; and (2) train all employees about how to prevent sexual harassment.

In early September of 2018, we notified you that the New York State Department of Labor, in consultation with the New York State Division of Human Rights, developed and released a DRAFT model sexual harassment prevention policy (which included a model employee complaint form) and a model sexual harassment prevention training program. The State asked employers and other interested parties for comment.

After considering these comments, the State issued its final guidance on October 1, 2018. The updated final guidance and other resources–including a model policy, model training materials, and a Toolkit For Employers–are available on a website known as Combating Sexual Harassment in the Workplace.

Here’s what you need to know right now:

Employers must issue to employees, by the close of business on October 9, 2018,a compliant sexual harassment prevention policy.

The deadline to provide the mandated training for existing employees has been extended to October 9, 2019 (the original deadline was January 1, 2019).

The final guidance eliminated the requirement that all newly hired employees receive sexual harassment prevention training within thirty days of hire, however, it recommends that new hires be trained “as quickly as possible.”

A complaint form need not be included within the sexual harassment prevention policy itself, however, employers should be clear about where an employee may secure such a form. Employers can adopt the model employee complaint form.

The final guidance also includes FAQs addressing the policy and training requirements, as well as on nondisclosure agreements and mandatory arbitration provisions.

Earlier this year, we notified you about changes made to New York laws that prohibit sexual harassment in the workplace. The most significant change was that ALL employers must by October 9, 2018: (1) adopt and distribute to employees a sexual harassment prevention policy; and (2) train all employees by January 1, 2019 (and annually thereafter) about how to prevent sexual harassment.

The public, employers and employees are encouraged to provide comments on the proposed policies. Comments can be submitted on or before September 12, 2018. All comments will be reviewed and necessary revisions will be considered.

We do not know whether any changes will be made to the model policy and training program. That said, we encourage you to do the following:

Read the model policy and consider whether you should adopt the model policy and complaint form or modify your existing policy and complaint form to meet minimum standards. For a variety of reasons, we do NOT recommend that you simply exchange your existing policy for the model policy, particularly without getting advice from legal counsel.

Consider when you will provide ALL your employees with the required anti-sexual harassment training on or before January 1, 2019 (and annually thereafter). We expect that there will be a video option available, however, employees must be able to ask questions and interact with someone knowledgeable about the law and the employer’s policies.

New York’s unemployment insurance [“UI”] benefit program provides cash benefits to people who have worked long enough, who have lost employment through no fault of their own, who are ready, willing and able to work, and who are actively seeking work.

Failing to prove that you have looked for work can defeat an otherwise valid UI benefit claim. The New York UI benefit program is administered by the New York State Department of Labor [“NYSDOL”].

How Should a Work Search be Done?

A work search record should be kept for each week that you claim that you are entitled to UI benefits. A record can be written (usually on the NYSDOL’s WS5 form) or kept online (http://www.jobzone.ny.gov/). The record must include dates, names, addresses (mail, e-mail or web address) and telephone numbers of employers contacted, names and/or job titles of specific people contacted, contact methods used and the position or job title applied for. You may also include a description of other work search efforts used (attending job fairs, workshops, vocational rehabilitation, etc.).

The NYSDOL requires you complete at least three “work search activities” per week. These activities must be done on different days of the week (meaning you must be performing some form of work search at least 3 days per week). At least one of these activities must be using employment resources at the local Career Center, visiting a job site and completing a job application, submitting a job application or resume in response to a public notice, attending a job search seminar, job fair or other employment-related workshop, or interviewing with possible employers.

You must be prepared to provide a copy of your work search record to the NYSDOL when requested. If you do not keep an online record of your work search efforts, you can obtain the proper written forms online, at your local Career Center or in the back of the Claimant Handbook.

Does the NYSDOL Verify my Work Search?

YES. The NYSDOL will verify the information provided on your work search record. If false information is knowingly provided about your work search activities, it is fraud. Findings of fraud can be accompanied by significant penalties.

What Happens if I am Offered a Job?

You must accept “suitable” work. Suitable work is work that you can reasonably do considering your past training and experience. Typically, this is work in your most recent occupation.

However, after collecting 10 full weeks of UI benefits, the definition of “suitable” is expanded to include: (1) Any work you can do, even if you have no training or experience in such work unless you are hired through a union hiring hall or have a definite date to return to work, (2) such work must pay at least 80% of your high-quarter base-period wages and must pay the prevailing wage for such work, and (3) you must be willing to travel a reasonable distance to get work which includes one hour by private transportation or one and one half hours by public transportation.

Is Anyone Exempt from the Work Search Requirements?

YES. The NYSDOL should tell you if you are exempt. You may be exempt if:

(1) You are temporarily laid off or seasonally employed and have a definite return-to-work date of four weeks of less.

(2) You are a Union member who must obtain work through the Union hiring hall. You must be in compliance with your Union’s membership and work search requirements.

(3) You are participating in a training program approved by the Department of Labor.

(4) You are serving on a jury.

(5) You are participating in a NYSDOL approved shared work program.

(6) You are participating in a NYSDOL approved self-employment assistance program.

(7) You are covered by any other exemption required by state or federal law.

In Closing

If you apply for and receive UI benefits, be prepared to perform and document a work search in compliance with the NYSDOL’s requirements. Do NOT falsify your work search records as the penalties for doing so are MUCH worse than not receiving UI benefits. When in doubt, contact your local Career Center for guidance. Lastly, if you think you may be exempt from the work search requirements, ask a NYSDOL representative BEFORE discontinuing your work search.

Proposals made by New York Governor Andrew Cuomo to change workplace sexual harassment laws in New York were enacted into law as part of the Fiscal Year 2019 budget. Here is what you need to know about these new laws and some related developments.

Mandatory Training & Anti-Harassment Policies

All employers are required to: (1) adopt a sexual harassment prevention policy; and (2) train all employees annually about how to prevent sexual harassment. The New York State Department of Labor, in consultation with the New York State Division of Human Rights, will develop a model policy and a model training program.

Employers can use these models, or develop their own, so long as the policy and training equal or exceed the minimum standards in the models. These requirements go into effect on October 9, 2018.

No Mandatory Arbitration

Employers are prohibited from imposing mandatory arbitration clauses to “resolve any allegations or claims of an unlawful discriminatory practice of sexual harassment” except where inconsistent with federal law.

Whether this provision will be enforced under previously decided United States Supreme Court cases is unknown. The Supreme Court had held consistently that the Federal Arbitration Act preempts state laws which expressly prohibit a category of claims from being arbitrated. This provision takes effect on July 11, 2018.

Employer Liability for Sexual Harassment of Non-Employees

The new law confirms that employers may be held liable for sexual harassment of non-employees (e.g., contractors, vendors and consultants).

Employers are liable if they knew or should have known that the non-employee was subjected to sexual harassment at the employer’s workplace and failed to take appropriate corrective action. This provision took effect immediately upon signing.

No Non-Disclosure Provisions

Parties to a settlement or other resolution of a sexual harassment claim are prohibited from including terms that would “prevent the disclosure of the underlying facts and circumstances” related to such claim unless such terms are the preference of the alleged victim.

Any agreed upon confidentiality provisions must apply to both parties. Further, an alleged victim must be given 21 days to consider whether to accept the proposed confidentiality language, and then seven days to revoke his or her acceptance of it. Any agreed upon confidentiality provisions only become effective after the seven-day revocation period has expired. This provision takes effect on July 11, 2018.

New Language in State Contract Bids

Every bidder on a competitive state contract (seeking to provide services, work or goods) must certify that it: (1) has implemented a written policy addressing sexual harassment prevention in the workplace; and (2) provides for annual training for its employees on sexual harassment prevention.

Where competitive bidding is not required, bidders nevertheless may be required to make the necessary certification as determined by the salient state agency or official. Failure to include the required language in a bid will result in the bid not being considered. This provision will take effect on January 1, 2019.

Reimbursement of Public Funds Paid to Victims

Public employees or officers–whether elected, appointed, paid or unpaid–who are found personally liable for sexual harassment must reimburse the government for taxpayer funds used to pay the victim(s).

There are important caveats and limitations. For example, a public official’s reimbursement obligation is limited to his or her “proportionate share” of the liability and the obligation arises only with respect to “final judgments” and “adjudicated awards.” This provision took effect immediately upon signing.

Major tax reform was approved by Congress in the Tax Cuts and Jobs Act (“TCJA”) on December 22, 2017. At least two parts of this complex legislation affect sexual harassment claims.

Employers are no longer entitled to a tax deduction for payments they make in sexual harassment cases (to the alleged victim and to the attorney for the alleged victim) if there is a non-disclosure agreement. More significantly, employers are no longer entitled to a tax deduction for legal expenses they incur to defend these claims. Thus, the new tax law treats sexual harassment settlements and related legal fees more harshly than nondeductible government fines (where legal fees still could be deducted).